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Tobacco companies plea for no big US payments

by Pete Yost | The Associated Press

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WASHINGTON — Tobacco industry lawyers met secretly with Solicitor General Elena Kagan in an effort to avoid the government's last-ditch attempt to extract billions from companies that illegally concealed the dangers of cigarette smoking, The Associated Press has learned.

Four cigarette makers that control nearly 90 percent of U.S. retail cigarette sales have until Feb. 19 to persuade the government not to go to the Supreme Court and ask the justices to step into a landmark 10-year-old racketeering lawsuit.

In 2006, a judge ruled that the industry concealed the dangers of smoking for decades. Despite that finding, lower courts have said the government is not entitled to collect $280 billion in past profits or $14 billion for a national campaign to curb smoking.

As part of any effort to convince the government that it should skip a trip to the Supreme Court, the tobacco companies may have to drop plans to ask the justices to overturn the ruling that the industry engaged in racketeering.

On behalf of the industry, Washington lawyers Michael Carvin and Miguel Estrada made their pitch against seeking Supreme Court review in a mid-December meeting at the Justice Department with Kagan, according to two Washington attorneys outside the government who are familiar with the meeting in her office.

In the meeting, Carvin and Estrada left the impression the industry might be willing to end plans to seek a high court appeal of its own, if the Justice Department would do the same, said the Washington attorneys, who spoke on condition of anonymity so that they could discuss the private meeting with Kagan.

The discussion with Estrada and Carvin resulted in an internal department meeting a few days later. At this meeting, department lawyers discussed the possibility of seeking billions of dollars from the industry as part of a possible negotiated settlement of the suit, according to one of the private attorneys who learned about this second meeting from participants.

The department, the industry or both could request that the Supreme Court take the case, while at the same time asking that the case be delayed while the two sides try to work out a deal.

If the companies also agreed not to seek an appeal, they would be accepting the findings of U.S. District Judge Gladys Kessler that they engaged in a scheme to defraud the public by falsely denying the adverse health effects of smoking, concealing evidence nicotine is addictive and lying about their manipulation of nicotine in cigarettes to create addiction. Last May, a federal appeals court upheld the findings. The companies then pledged to appeal to the Supreme Court.

Kessler ordered the companies to make corrective statements about the adverse health effects of smoking, the addictiveness of smoking and nicotine, the companies' manipulation of cigarette design and composition to ensure optimum nicotine delivery and the adverse health effects of exposure to secondhand smoke. These statements must appear on company Web sites, cigarette packages and newspaper and television ads.

If Kessler's findings stand, they will set a precedent that other plaintiffs can use for future suits against the tobacco companies.

"The trial court's findings are devastating to the tobacco industry," said Matthew L. Myers, president of the Campaign for Tobacco-Free Kids, one of the public health groups allowed by Kessler to join the case in 2005 on the side of the Justice Department. "We have urged the department to go to the Supreme Court to significantly strengthen the remedies, particularly with regard to funding smoking cessation and public education."

Tobacco company defendants in the lawsuit are Philip Morris USA Inc. and its parent company, Altria Group Inc.; R.J. Reynolds Tobacco Co.; British American Tobacco Investments Ltd.; and Lorillard Tobacco Co. Philip Morris, R.J. Reynolds and Lorillard account for nearly 90 percent of U.S. retail cigarette sales. A former U.S. subsidiary of British American Tobacco, Brown & Williamson Tobacco Corp., merged with Reynolds in 2004.

The way the federal suit has played out contrasts sharply with state action against the tobacco industry.

The companies have agreed to pay $246 billion over 25 years to settle suits states brought to recover their costs of treating smoking-related illnesses in the Medicaid program, which serves the poor and disabled.